Fraser bemoans lost opportunities

Former Reserve Bank chief, Bernie Fraser, has hitout at the failure to use Australia's economic strength to address major commuity issues such as education, health, transportand energy.

He also suggested most of the inflation gains revealed in the lastest numbers were as a result of China's low cost imports.

His comments came as Australia's consumer prices fell in the fourth quarter for the first time in almost eight years as the cost of gasoline and medicines declined.

The consumer price index fell 0.1 percent in the three months ended Dec. 31, after gaining 0.9 percent in the third quarter, the Bureau of Statistics reported today. The annual inflation rate was 3.3 percent.

The median market forecast for the headline CPI was for a rise of 0.2 per cent in the CPI in the December quarter, which would have lowered the annual pace to 3.6 per cent.

Fraser described the lower inflation numbers as "confidence boosting" but that the Government had missed an opportunity.

"I think that's the great pity of this, that we haven't converted that into improving our social infrastructure or our economic infrastructure," he said.

"We've got problems in education and health, we've got problems in power supply and transport facilities and the opportunity has been missed, I'm afraid."

Fraser was closely associated with the previous Labor Government, in particular Paul Keating,  and has been the public face of the Industry Superannuation funds. 

Economists warned the strength of core inflation meant the Reserve Bank could still lift rates next week.

ICAP chief economist Michael Thomas said while the headline inflation was a lot weaker than expected, core inflation would still pose a concern to the bank.

"The headline was better than expected but the ABS's core measure - if it's close to where the RBA ones are - is still suggesting they could go," Mr Thomas said.

"We've got a nice surprise on the headline number but in underlying terms, inflation is still near the top of the RBA's band."